Market Cool On M.O.B.A. Network AB (publ)'s (STO:MOBA) Revenues

M.O.B.A. Network AB (publ)'s (STO:MOBA) price-to-sales (or "P/S") ratio of 0.9x may look like a pretty appealing investment opportunity when you consider close to half the companies in the Interactive Media and Services industry in Sweden have P/S ratios greater than 1.6x. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

View our latest analysis for M.O.B.A. Network

What Does M.O.B.A. Network's Recent Performance Look Like?

Revenue has risen at a steady rate over the last year for M.O.B.A. Network, which is generally not a bad outcome. It might be that many expect the respectable revenue performance to degrade, which has repressed the P/S. Those who are bullish on M.O.B.A. Network will be hoping that this isn't the case, so that they can pick up the stock at a lower valuation.

We don't have analyst forecasts, but you can see how recent trends are setting up the company for the future by checking out our free report on M.O.B.A. Network's earnings, revenue and cash flow.

How Is M.O.B.A. Network's Revenue Growth Trending?

There's an inherent assumption that a company should underperform the industry for P/S ratios like M.O.B.A. Network's to be considered reasonable.

Taking a look back first, we see that the company managed to grow revenues by a handy 2.6% last year. Spectacularly, three year revenue growth has ballooned by several orders of magnitude, even though the last 12 months were fairly tame in comparison. Therefore, it's fair to say the revenue growth recently has been superb for the company.

Comparing that recent medium-term revenue trajectory with the industry's one-year growth forecast of 29% shows it's noticeably more attractive.

With this information, we find it odd that M.O.B.A. Network is trading at a P/S lower than the industry. It looks like most investors are not convinced the company can maintain its recent growth rates.

The Final Word

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

We're very surprised to see M.O.B.A. Network currently trading on a much lower than expected P/S since its recent three-year growth is higher than the wider industry forecast. When we see strong revenue with faster-than-industry growth, we assume there are some significant underlying risks to the company's ability to make money which is applying downwards pressure on the P/S ratio. At least price risks look to be very low if recent medium-term revenue trends continue, but investors seem to think future revenue could see a lot of volatility.

Don't forget that there may be other risks. For instance, we've identified 5 warning signs for M.O.B.A. Network (1 makes us a bit uncomfortable) you should be aware of.

If companies with solid past earnings growth is up your alley, you may wish to see this free collection of other companies with strong earnings growth and low P/E ratios.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.